3. Discuss for question (a) and (b)
- Define and identify the type of Income / Expenses
- Treatment of the Income / Expenses in the Profit and Loss account, Impact of the
Income / Expenses in the Balance Sheet
a. You purchased 10 shares of L& T Company last year. On 5th March 2019, the
company has declared a dividend Rs 50 per share. The income is earned but not yet
collected in your account during this financial year. (5 Marks)
b. On 5th March 2019, Mehta Brothers received 100% advance for goods, to be supplied
in the next month. The Cost of the goods was Rs50000. They usually sells the goods at
10% mark up. (5 Marks)
Answers
Answer:
Discuss for question (a) and (b)
- Define and identify the type of Income / Expenses
- Treatment of the Income / Expenses in the Profit and Loss account, Impact of the
Income / Expenses in the Balance Sheet
a. You purchased 10 shares of L& T Company last year. On 5th March 2019, the
company has declared a dividend Rs 50 per share. The income is earned but not yet
collected in your account during this financial year. (5 Marks)
b. On 5th March 2019, Mehta Brothers received 100% advance for goods, to be supplied
in the next month. The Cost of the goods was Rs50000. They usually sells the goods at
10% mark up. (5 Marks)
Answer:
Explanation:
Explanation:
Answer:
• Identification of Income: It is an Accrued Income.
• Definition: Accrued income is a revenue that has been earned but has yet to be received.
Examples: Dividend declared by company but not received yet (Financial year), Interest earned by company but not received at the end of Financial year.
• Treatment of accrued income: In profit & loss account it has been posted in credit side as an income ‘Dividend Income’
In Balance sheet it has been shown as an Assets (Current Asset)
Shows it on the credit side of the Income Statement (profit & loss account) as it is an income for the current Accounting period (just not received yet).
Shows it on the asset side of the Balance Sheet under the head “Current Assets”.
Particular Debit/Credit Impact
Accrued Income A/C Debit Debit the increase in Asset
To Income A/C Credit Credit the increase in income
Journal Entry:
Date Particular Dr/Cr Debit Credit
05TH March,2019 Dividend Receivable a/c Dr 500
To Dividend income a/c Cr 500
(Being dividend earned but not received yet)
Explanation:may help